With luxury compact cars such as the Mercedes A and B class and BMW 1 series already on the roads, market leader Audi is getting ready for a counterattack with the A3 sedan next year.

With luxury compact cars such as the Mercedes A and B class and BMW 1 series already on the roads, market leader Audi is getting ready for a counterattack with the A3 sedan next year.

To be priced lower than its current entry-level sedan A4, it will also be cheaper than its compact crossover Q3, which is the cheapest Audi available in India now.

The A3 sedan is expected to be priced between Rs. 23-30 lakh. The Q3 costs Rs. 24.99 lakh, while the Mercedes range in India begins at Rs. 21.93-22.73 lakh for the A class, and the BMW's least expensive car is the 1-series, starting at Rs. 20.9-29.9 lakh.

However, unlike BMW and Mercedes, Audi has no plans to launch the A3 hatchback.

"We are studying the market closely. I believe the A3 sedan will be a very exciting car for India," said Joe King, head, Audi India.

"The success of Q3 shows the market's growing appetite for such cars. I am still not certain though if it is ready to pay such a high price for a small car... for now a sedan works best," King said.

Audi overtook BMW as the largest luxury carmaker in India last fiscal, but is facing fierce competition from Mercedes. Largely on the back of its two small cars, which account for nearly 25% of its overall sales, Mercedes nudged ahead between July and September.

"Being number 1 is not the end," said King. "We came in late but caught up with the others very fast. Now it is time to consolidate. We are not in the business of discounting or buying marketshare as that destroys the brand. Profitability is equally important."